We said more than once that the digital assets could disrupt traditional finance. Check out the latest reports about the stablecoins below.
Stablecoins and traditional banks
A top US banking regulator thinks stablecoins could “fundamentally alter” the traditional banking sector. This prediction is based on historical precedent.
In a new speech at the Brookings Institution, acting Federal Deposit Insurance Corporation (FDIC) chairman Martin J. Gruenberg compared the current crypto space to the free banking era of the late 1800s and early 1900s.
“As pointed out in the [Financial Stability Oversight Council] digital asset report, ‘currency during the free banking era consisted of bank notes, that is, liabilities of individual banks payable in gold or silver if presented at the issuing bank. As many as 1,500 currencies circulated at any one time.’”
He continued and said this:
“This decentralized form of monetary exchange led to numerous bank runs and cycles of bank failures. While our financial system has advanced significantly over the past century, we would do well to keep our history in mind.”
He believes that it offers a valuable lesson about the risks of private money, both digital and physical, for the US financial system.
This is what happens when we consider the more-than 21,000 crypto assets currently in existence.
Stablecoins in the news
Accoridng to the latest reports, it seems that a new experiment shows central bank digital currency (CBDC) can work with private stablecoins. It’s been revealed that this can happen even if intermediary operators go bust, the Hong Kong Monetary Authority said Friday.
Just to refresh your memory, private stablecoins are designed to maintain stable values relative to a reference currency like the U.S. dollar or an asset like gold. On the other hand, CBDCs are digital versions of sovereign currencies.
Stay tuned for more news and check out our previous article for more details.
